June 2009

June 27, 2009

There’s an unemployment problem in this country, but it’s not the one you think it is.The unemployment rate, already over 10 percent in 14 states, is expected to reach that figure nationally in the U.S. later this year, and most blame it entirely on the Great Recession that presently plagues us.While that blame is not ascribed entirely unfairly, focusing exclusively on the current, acute economic troubles so intently may obscure a bigger, more ominous threat to the long-employed: cultural change and technological progress.

From automobiles to newspapers, evolution in technologies, as well as changes in temperament and taste, are yielding significant and everlasting changes in whole industries, to include seeing to their outright elimination.This condition will persist long after the current, shorter-term economic troubles have ended, and for many the remedy will be found with adaptation; the ability to recognize, with great foresight, the societal changes in direction and smartly react to them.

The adaptation about which I speak may take any of a variety of forms in its manifestation.It may mean physically moving from your present location to one where jobs are more plentiful; it may mean returning to school, to earn advanced certifications or a new profession altogether; it may mean harnessing the power and opportunity presented by the Internet age to cultivate multiple streams of income from several of the mechanisms available therein.

Adaptation is not always pleasant, because adaptation means more work and sacrifice.That said, the writing is on the wall, my friends, and those who choose not to see it may well find themselves represented in unemployment figures long after the current economic mess is a part of history.

June 16, 2009

In what has become an all-too-common occurrence in the middle of this global financial turmoil, an Orlando, Florida man has apparently killed his entire family, as well as himself, in a desperate attempt to free them all from the grip of severe financial troubles.John Wood, 41, appears to have shot his wife Cynthia, 40, and their two children, ages 10 and 12, before turning the gun on himself.Details are still emerging, but those that have seen the light of day thus far include things like bankruptcy troubles, $85,000 in credit card debt, lost jobs, and general financial calamity.

Unfortunately, we’re also learning that in the face of these difficulties, mom and dad seemed disinclined to apply any brakes.The bodies were discovered by a housekeeper, begging the question why someone in such a dreadful bind still had a housekeeper.There’s more, including well-known weekly shopping trips to the mall, and even a recent trip to Las Vegas wherein John and Cynthia allegedly lost $2500 while gambling.

We don’t know precisely what brought about this horrible tragedy, and we may never know…but the speculation about financial problems seems fair, given what has been uncovered so far.What is disturbing is that it seems, by all accounts, that John and Cynthia were unwilling to rein in their lust for consumption, even in the face of trouble that began years before.They lived in a beautiful home, in a gated community, and owned cars, a boat, a motorcycle, etc.; how awful to think that an insistence on living that life, for as long as they lived at all, was more important than life itself.

June 03, 2009

When a big-name company falls on significantly hard times, or even goes belly-up the way GM has done, I will get calls and letters from mutual fund investors wondering what that unfortunate condition means to them.Happily, the usual answer is, “not much,” and that answer applies here to GM, as well.

Most mutual funds are actively managed, which means the fund management team can buy and sell the stocks in the underlying portfolio as it sees fit.Unfortunately, popular index funds (unmanaged mutual funds that are constructed to mirror the stocks that make up a given index) have been stuck owning GM because the associated indexes…like the S&P 500…have the stock as a component security.Nevertheless, even in such cases, the impact of GM has proven to be minimal.For example, the S&P 500’s pricing is based largely on the market capitalization (# of outstanding shares X share price) of its stocks, and GM’s market cap has been small, so its effect on an associated index fund will also be quite small (it should be noted that GM is no longer a component of the S&P 500, effective COB June 2).

The minimal impact of GM even on mutual funds that are required to hold it shows, once again, the wisdom of engaging the stock market with a diversified portfolio.For those who do their investing through funds, they can rest assured that while they may not be spared the large-scale negative movements of equities markets, even the total collapse of a storied company within their portfolio will be of little consequence to them.